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x Cengage e Secure * Aolia: Student Question * - https://courses aplia.com/al/servlet/quiz?quiz action=takeOuiz&quiz; probGuid=ONAPCUA8010100000041cdabb0040000&ctx;=robert2-0039&ck;=m 1530329605397 UAAADUD30163D29188999/60000 1. Basic concepts ?. ?? During the wake or the financial crisis, Ben Bernanke, chairman of the Federal Reserve, said that shortening the cash cycle and better use of working capital are the most important factors as private sector businesses struggle to overcome the current economic volatility and difficulty in accessing capital markets (lem Global Business Services, Managing Working Capital in the New Economic Environment, 'htts://www.-935.ibm.com/services/uk/bcs/pdf/working capital_paper.pdf). Considering how important working capital management is, water and Power Co. decided to evaluate the amount of working capital being used in the firm and explore the prospects of how its working capital will be financed. Water and Power Co. reported the following results for current assets and liabilities on its most recent balance sheets. Interestingly, the company's sales did not change-It reported sales of $5,550 for its most recent year as well as for last year. The columns labeled 'Ending ($)' show results at the end of the most recent year, and the columns labeled "Beginning ($)" show results at the end of the previous year: Beginning ($) Ending (S) Beginning (5) Ending ($) Current assets Cash Accounts receivable Inventory 1,300 2,500 1,950 2,500 2,000 1,700 Current liabilities Accounts payable Nates payable Accruals 2,400 1,500 2,450 1,800 Using the information given and a 365-day year, calculate days of working capital, net working capital, and net operating working capital for Water and Power Co. Use your calculations to complete the following statements: • Water and Power Co.'s days of working capital improved from days in the previous year to days at the end of the most recent year. • The company's net working capital increased from $1,750.00 in the previous year to at the end of last year. • Water and Power Co.'s net operating working capital increased from In the previous year to $3,750.00 at the end of last year. Consider the following statement: 47:56 Session Timeout 11:45 PM Type here to search O e 69 AI 6/29/2018Explanation / Answer
Days working capital=365*(working capital/sales)
Previous year: working capital=current assets-current liabilites
=(1300+2500+1950)-(2400+1600)=1750
Sales=5550
Days working capital=365*(1750/5550)=115.09
recent year: working capital=current assets-current liabilites
=(2500+2000+1700)-(2450+1800)=1950
Sales=5550
Days working capital=365*(1950/5550)=128.24
1)115.09 to 128.24
2)1950
3)Net operating working capital
Previous year:=(1300+2500+1950)-(2400)=3350
recent year:=(2500+2000+1700)-(2450)=3750
3350
True
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